Overseas aid ‘rebounds’ to record high, says OECD

aid spending


Overseas development aid (ODA) jumped 6.1% last year to reach a record $134.8 (€97.8) billion, according to new figures from the Organisation for Economic Cooperation and Development (OECD), marking a “rebound” after two years of falling donations.

Some 17 of the OECD’s 28 member countries increased their ODA spending in 2013, bringing the group’s average aid spending to 0.3% of Gross National Income, although this is still less than half the 0.7% figure that developed countries have pledged to meet by 2015.

“It is heartening to see governments increasing their development aid budgets again, despite the financial constraints they are currently facing,” said the OECD Secretary-General Angel Gurría, even if she remained concerned that assistance to some of the neediest countries was continuing to fall. Most donor activity appears to have been targeted on middle-income countries with bilateral aid to sub-Saharan Africa dropping off by 4% in real terms last year, and assistance to the Africa as a whole plummeting by 5.6%.

For the OECD’s 19 EU member states, the aid increase in 2013 came to 5.2% – a full 0.42% of their combined GNI. But while the UK increased aid spending 27.8%, France’s spending fell 9.8%, and in austerity-hit Portugal, ODA declined by a dramatic 20.4%.   

Oxfam warned that this was far too little to meet the 2015 target, and noted that even among the big OECD-DACs (Development Aid Contributors), too much assistance was still being supplied in the form of ‘tied aid’ that must be spent in the country which provided it.

“It’s bad enough that most of Europe’s wealthiest countries are far from reaching their aid promises but counting funding that never gets to poor countries, like debt relief and export credits, as aid is simply unacceptable,” Natalia Alonso, the head of Oxfam’s EU office told EURACTIV.

“Clearly, the EU still has a long way to go to meet our collective commitment,” the EU’s development commissioner, Andris Piebalgs commented, “but measures taken by some member states show that we can deliver on our promises, even in difficult budgetary circumstances, provided the political will is there.”

Some measures though may be primarily statistical, according to the OECD. While total bilateral ODA grants rose by 7.7% in real terms, around half of this figure was made up by writing off debts, many of which might anyway not have been repaid.

The longevity of some of the aid spending may also be contested. One OECD state, the United Arab Emirates now leads the ODA table, with a 1.25% score, after registering a 375.5% spike in its aid spending. This was due to financial and infrastructure contributions to Egypt – after the Muslim Brotherhood government was overthrown. Turkey meanwhile notched up a 29.7% aid increase due to the crisis in Syria.

Private sector engagement rules

The new, additional, and genuinely altruistic proportion of such aid is often contested, as is the way that private sector funding should be counted within it.

The European Commission will later this month publish a set of ‘private sector engagement’ principles – but not rules – governing how the ‘for-profit’ sector should be engaged in development assistance.

“We will put quite some emphasis on strengthening dialogue with the private sector on development issues and on how we can promote the private sector locally,” an EU official told EURACTIV.

OECD rules currently allow loans with a grant element of at least 25% to be logged as ODA – though this has proved controversial – and stepping up use of this mechanism may allow the 0.7% target to be met, on paper at least.

“The idea is to step up use of blending mechanisms with development banks, but then in the mid-term, we would be keen to expand it to bring in more private investors,” the official said.

A report by the development group Eurodad earlier this year found that the current system allowed profit-making loans to count as aid and inflated the value of donors’ commitments.  Ambiguous OECD-DAC rules – which may be revised this June – left the system open to abuse by donors such as France and Germany, and risked an actual increase in debt distress. 

Free rider effect

Arbitrary and very high reference interest rates allowed predatory lending to be counted as ODA, without increasing actual aid budgets, the report found.

Similarly, vague ‘concessional in character’ requirements allowed risk-mitigating mechanisms such as sovereign guarantees and credit default risk to count as aid.  

“Obviously, when you do this [involvement] with private investors you have to be particularly vigilant that it really has a development objective,” the EU official said. “We don’t want to be seen to subsidise private investments that would be done anyway. We don’t want a free rider effect.”

Other measures in the Commission’s proposal may include support for business organisations, improved investor safety, establishing a dialogue platform with the private sector and a possible twinning of the European and American chambers of commerce.

A set of OECD indicators also published yesterday showed that economic growth was likely to slow in most large developing world economies, but to grow in the Eurozone.

Seamus Jeffreson, the director of CONCORD, the European Confederation of Relief and Development NGOs said: "Aid austerity is starting to reverse across Europe, despite two years of substantial cuts that are still felt by some of the world's poorest. Many development projects have been stopped or abandoned as a consequence."

“While we’re happy to see some countries like the UK and Sweden increasing their contributions, in this era of unprecedented global riches, it’s shameful that most of Europe’s wealthiest countries are failing to meet agreed minimum standards to end poverty and reduce economic inequality,” said Natalia Alonso, head of Oxfam’s EU Office in a statement. “When countries such as France, Portugal and Belgium fail to meet their aid promises, their actions have a real human cost that simply mean fewer teachers and nurses in the world’s poorest countries. European aid saves lives every year and is irreplaceable,” she added.

Oxfam noted that on the European Commission’s own aid spending figures, in 2012 the €13 billion it spent represented 23% of government revenue in Sierra Leone, 22% in Comoros, 19% in Burundi, 18% in Malawi, 13% in Madagascar and 12% in Togo. “Unlike aid, other sources of development finance like foreign direct investment or loans are not designed to get people out of poverty. Aid, for example, can help poor countries raise their own resources for basic services like health and education by helping strengthen their tax systems,” Alonso added.  

Amy Dodd, coordinator of the UK Aid Network, and chair of CONCORD AidWatch said: "We're proud that the UK has met the historic promise to devote 0.7% of GNI to overseas development aid. This relatively small amount of money - £11 billion out of the UK's overall £730 billionbudget - is life-saving and life-changing support for poor, marginalised and vulnerable people around the world."

The EU Commissioner for Development Andris Piebalgs commented: “I am glad to see that the recent decline in ODA spending seems to have been reversed and we are seeing a positive trend again. Clearly, the EU still has a long way to go to meet our collective commitment, but measures taken by some Member States show that we can deliver on our promises, even in difficult budgetary circumstances, provided the political will is there. I am particularly pleased to see that the United Kingdom has achieved such a significant increase. I encourage all Member States to intensify their efforts in our last sprint to 2015.”

 "With just one year to go the end of the UN's Millennium Development Goals, the EU aid record is still off track to reach the 0.7% aid target. We urge the EU and its member states to review the current state of the 0.7% target during the upcoming meeting of the Foreign Affairs Council in May and consequently during the European Council Meeting in June", added Zuzana Sladkova, AidWatch coordinator of CONCORD.

In 2005, EU member states pledged to increase Official Development Assistance (ODA) to 0.7% of Gross National Income (GNI) by 2015 and included an interim target of 0.56% ODA/GNI by 2010.

These were based on individual targets of 0.7% ODA/GNI for the EU 15 and 0.33% GNI for the 12 Member States which joined the EU in 2004 and 2007, according to the European Commission.

EU countries that were already at or above 0.7% ODA/ GNI pledged to sustain their efforts. The EU Heads of State and Government reaffirmed their commitment to reach the 0.7% target by 2015 at the European Council on 7/8 February 2013.

A Eurobarometer survey from October 2012, said that 85% of polled EU citizens believed that Europe should continue donating aid to developing countries.

  • 2015: Deadline for EU and UN target for providing 0.7% of national income for overseas aid
  • 2015: New UN Sustainable Development Goals due to be agreed

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